Recent Western Cape Business News

The South African economy offers entrepreneurs a host of opportunities for the future; and buying an existing business is often a good route to take, particularly for people leaving the corporate world for the first time says Barry Berman, MD of the Cape Town-based Mekaish Group.

A sound business has an existing revenue stream that can be used to fund the purchase and provide lenders with a higher degree of confidence due to its track record.

Berman says in the current economic climate there are a number of distressed businesses on offer but most entrepreneurs would do better to look at solid businesses that can weather the storm. There is a market for businesses in distress but this is often a sector best left to experienced entrepreneurs who have developed the skills and experienced needed to formulate and execute a turnaround strategy.

Another consideration is that entrepreneurs may wish to consider businesses in sectors and industries in which they already have experience.

“I would be loathed to put anyone into any business when they have no experience of the industry, especially if the business is in distress,” Berman says.

He says there are many success stories that illustrate the value of buying an existing business and building it over time.

For example, Massmart was bought as a failing enterprise a couple of decades ago and today it is one of SA’s most successful retailers.

While the present economic environment does not favour new ventures, there are opportunities for entrepreneurs who have great ideas and the capital to sustain a new business.

At the same time, these entrepreneurs need to have the personal characteristics that will carry them through the ups and downs of bringing a new venture to the market.

“If it is a good, solid idea, the right entrepreneur can be very successful, even in the present market. It may take longer to get the business on its feet and reach a point where the business it is generating enough revenue. Therefore, entrepreneurs considering new ventures may wish to be at an earlier stage in their careers so that they have the time to build the business and the energy to cope with the demands they will face,” Berman says. “However the reality of buying an existing business is that it is less likely to fail and more likely to scale up since a new buyer brings added enthusiasm, drive and new ideas to the business.”